 |
Prof. Dr.Masum Billah |
Islamic Financial Planning At Practial Glance
By:
Prof. Dr. Mohd. Ma’sum Billah
masum@applied-islamicfinance.com
masum2001@yahoo.com
+6019-3699542
- FINANCIAL PLANNING is the process whereby an individual's personal and financial goals are achieved through the development and implementation of a comprehensive financial plan.
- INVESTMENT PLANNING is the part of financial planning that pertains to the allocation of investment assets.
- ISLAMIC FINANCIAL PLANNING is the process…(wealth as trust (amanah) and human is just a caretaker.
Objectives of Financial Planning
- Current needs and obligations
- Future needs and obligations
- Cost of retirement
- Emergency Fund
- Inflation effects
Financial Planning is a Religious Duty
- Embrace the religion wholeheartedly
- Islam – provides peace (al-salaam) cure (al-shifaa’) mercy ( al-rahmah)
- The importance of knowledge and practicing.
Individual’s Life Cycle
- Accumulation Phase (20-40)
- Consolidation Phase (40-60)
- Spending (60-80)
- Gifting
FIVE ASPECTS OF LIFE AS MUSLIM
(Al-Daruriyyat al-Khamsah)
- Religion (Deen)
- Life (Nafs)
- Reason (‘Aql)
- Lineage (Nasl)
- Property (Maal)
HOW DOES ISLAM VIEW WEALTH
- In Islam accumulation or acquisition of wealth is allowed and in some circumstances mandatory. However, wealth should not or misused as Allah SWT has laid down very clear injunctions on how wealth is to be acquired and spent. Above all, wealth is a form of trial by Allah SWT towards His servants; whether they follow His injunctions regarding wealth acquisition and disposal and as such the owners are ongoing to be fully accountable on the day of Judgment for what they do with their wealth. Allah (swt) Says:
- “And know you that your properties and your children are but trial; and that it is Allah with whom lies your highest reward” (Al-Anfal 8:28)
INVESTMENT… WHAT ARE THE CHOICES AVAILABLE?
If the person wishes to invest in the Islamic way, one must maintain:
- Saving account – Wadiah
- Current account – Wadiah / Mudharabah
- Investment account -Mudharabah
- Tabung Haji account
- Unit Trust
- Takaful
- Islamic Bond via unit trust
- Islamic Equities
- Properties etc
ISLAMIC FINANCIAL PLANNING -CURRENTLY
- Holy reference – al-Quran and al-Hadith
- Needs more scholars to extract and relate to the worldly requirement
- A cohesive networking instead of in isolation.
WHO SHOULD PLAY AN ACTIVE ROLE?
- Banking industry – marketing/product development
- Professional bodies – accountants, lawyers, tax agents and real estates agents
- Unit trust industry – federation management companies and agents
- Insurance industry- federation insurance companies and agents
- Stock broking industry – stockbrokers, association, stock broking firms remisers
- Regulators – BNM, SC, BSKL (RIIAM), MOF
- Training centre (e.g. independent bodies)
CONCLUSION
- Islamic Financial Planning is another step towards realization of Islamic way of life.
- Resorting to Islamic formulae and solutions (al-hall al-Islaami)
- The need to produce first true Muslim and Mu’min who is Mukhlis to uphold and practice his religion in all aspects of his life
RECOMMENDATIONS
Towards the Proper Implementation of the Followings:
FARAID (ISLAMIC LAW OF INHERITANCE)
WASIYYAH (WILLS)
HIBAH (GIFTS)
Faraidh and its Rules
"And for the males is a share of what has been left behind by the parents and relatives and for the females is a share of what has been left by the parents and relatives." (4:65)
The laws of Inheritance are derived from the Qur'an and Hadith
- The Islamic laws of inheritance is a divine justness and equitability
- Comprises beyond question the most refined and elaborate system of rules for the devolution of property that is known to the civilized world
- The different shares of the heirs have been predetermined.
- The shares are : ½, ¼, 1/8, 1/3, 2/3, 1/6
First Things First
Funeral Expenses
Debts
Wasiyyah
Distribute the remaining
Limitation in Faraid
- Consist of 15 heirs (male) and 10 heirs (woman) are entitle for the asset-can inherit by marriage, blood relations, owner of slave and Baitul-Mal
- Baitul-Mal will receive the remaining balance (asabah) if there is no heirs left
- Non-heirs do not have rights on Faraid
- - E.g.: Step son, friends
Wasiyah (Wills)
- Legal documentation which outlines on how you wish your assets to be distributed upon demise
- It will take effect only after demise
Rules on Wasiyah
“ O you believe! When death approaches any of you, and you make a bequest (then take) the testimony of two just men of our own folk or two others from outside, while you are traveling through the land and death befalls on you……….”(Al-Maidah: 106)
Limitation in Wasiyyah
Total of wasiyyah cannot exceed than 1/3 of assets
Eligible heirs are not entitle for wasiyyah
WHAT IS HIBAH?
The transfer of existing properties made voluntarily and without consideration by the Donor to the Donee and accepted on behalf of the donor during their lifetime.
Hibah is a very simple but yet powerful tool that can be used in financial planning
It is so simple that Financial Planners almost never recommend it
HIBAH
“……and gives his wealth in spite of love for it, to the kinsfolk, to the orphan and to the poor, and to the wayfarer and to those who ask”(Al-Baqarah : 177)
BENEFITS IN HIBAH
Protect your wealth from creditors
Overcoming the bureaucratic problems
- Distribution of assets is on your own choice
- Offer and acceptance is done during lifetime
CONCLUSION
- Hibah is the most important tool for protecting your family and assets
- We should have hibah even if our asset is small
- It is a device which can be utilized to provide the distribution of assets upon death; deciding it will provide best fits your needs